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Goldberg v. Mallinckrodt Inc.

June 9, 1986

DONALD D. GOLDBERG, M.D., PLAINTIFF-APPELLANT,
v.
MALLINCKRODT, INC., DEFENDANT-APPELLEE



Appeal from a grant of summary judgment in favor of defendant Mallinckrodt entered in the United States District Court for the Eastern District of New York (Henry Bramwell, Judge). Plaintiff, a doctor, alleged fraud by the defendant in connection with the sale of a medical dye that injured two of his patients. The district court granted summary judgment on the grounds that the damages claimed were not recoverable under New York law because they were too remote from the alleged fraud. Affirmed. Judge Lumbard concurs in part and dissents in part in a separate opinion.

Author: Winter

Before: LUMBARD, CARDAMONE and WINTER, Circuit Judges.

WINTER, Circuit Judge:

Dr. Donald Goldberg appeals from a grant of summary judgment in favor of Mallinckrodt, Inc., the manufacturer of an allegedly unsafe medical dye. Dr. Goldberg's complaint alleged that defendant had fraudulently misrepresented the safety of its product with the result that two of his patients were injured when he administered the dye. He claimed damages for his emotional distress and for his loss of income as a result of spending time defending malpractice actions. The district court granted summary judgment with respect to both claims. We affirm.

BACKGROUND

The facts as alleged are as follows: In October, 1976, Dr. Goldberg, an orthopedic surgeon, attended a physicians' conference at which he learned for the first time about "Dimeray," a new product manufactured by defendant Mallinckrodt. Dimeray is a dye injected into a patient's spinal cord during a procedure known as a myelogram. The dye acts as a "contrast medium" that makes the spinal cord more visible, apparently during an X-ray. Defendant touted Dimeray as an improvement on the dye then in general use, as it provided clearer myelograms and would pass naturally out of a patient's system. The ability to pass naturally out of the body was significant, for the dye then in general use had to be withdrawn from the body by needle after it was used. Defendant represented that more than three thousand tests indicated that Dimeray had no adverse side effects involving serious neurological damage. This representation allegedly was false and known to be so when made.

Impressed by the claims made about Dimeray at the conference, Dr. Goldberg used the product on a patient, who shortly thereafter suffered severe pain, paralysis, and other symptoms of nerve damage. Relying on the prior assurances of defendant as to Dimeray's safety, the doctor did not associate this adverse reaction with the product. One month later he administered the product to another patient, who also developed sever pain, lower body paralysis, and other symptoms of nerve damage. Both reactions are typical of a condition known as "cauda equina syndrome," allegedly represented by defendant not to be a side effect of Dimeray. The doctor notified Mallinckrodt of the adverse reactions. Shortly thereafter, Mallinckrodt voluntarily withdrew Dimeray from the market based on reports it had received of similar adverse reactions associated with use of the product.

Both of the injured patients brought lawsuits. In one, the patient sued Dr. Goldberg, who impleaded Mallinckrodt as a third-party defendant. In the other, the patient sued Mallinckrodt, who impleaded Goldberg.

Dr. Goldberg brought this diversity action in July, 1982. His first complaint did not allege a cause of action for fraud and was dismissed. An amended complaint alleged that Mallinckrodt had fraudulently misrepresented the safety of its product by failing to disclose knowledge of adverse reactions to Dimeray. Plaintiff claimed damages for (i) emotional distress, (ii) harm to reputation, (iii) impairment of earning capacity, (iv) out of pocket costs incurred defending the malpractice suits, and (v) the income lost as a result of time spent preparing a defense of the malpractice claims. During discovery, the damage claims were narrowed to economic loss caused by time spent away from his medical practice in defending the malpractice actions and for economic loss caused by plaintiff's inability to perform myelograms. This letter inability allegedly stemmed from Dr. Goldberg's emotional distress over the adverse reactions suffered by his patients.

Both sides moved for summary judgment. On June 21, 1985, the district court granted partial summary judgment for defendant, dismissing Dr. Goldberg's claim for "damages based on or arising out of mental and emotional distress." Subsequently, the court also dismissed the claim for lost income for time spent defending the malpractice suits. It concluded that under New York law damages for fraud must be shown to be a direct result of the fraudulent misrepresentation and that the lost income was too remote from the fraud alleged. Because damage is an essential element of a valid fraud claim, the court dismissed the action. We affirm.

Discussion

The sole issue on this appeal is whether the damages claimed are compensable in a fraud action.

1. The Claim for Lost Income Resulting From the Time Spent Defending Lawsuits

Under New York law, damages for fraud must be the direct, immediate, and proximate result of the fraudulent misrepresentation. See Bennett v. United States Trust Co. of New York, 770 F.2d 308, 316 (2d Cir. 1985); Idrees v. American University of the Caribbean, 546 F. Supp. 1342, 1350 (S.D.N.Y. 1982); Deyo v. Hudson, 225 N.Y. 602, 122 N.E. 635 (1919); Mills Studio, Inc. v. Chenango Valley Realty Corp., 15 A.D.2d 138, 141, 221 N.Y.S.2d 684, 687 (3d Dept. 1961). Dr. Goldberg's argument that the time spent away from his practice was a direct result of defendant's alleged fraud goes as follows. The misrepresentations about Dimeray induced him to purchase and use the product, thereby making plaintiff the "unwitting instrumentality by which defendant's fraud was extended to the public." Brief of Appellant at 14. As a consequence of Dr. Goldberg's use of the product, two patients were injured, and they predictably ...


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